Five years after the introduction of the first austerity measures in Europe, it is time to assess the first implications of these policies on the real economy.

Portugal, Greece, Italy and Spain have put in place very tough austerity measures. Some economists such as Alberto Alesina have argued that austerity might have boosted in the long term economic growth, thus reducing the government debt. Unfortunately the data show another story: in Ireland government debt has increased by 368% in the past 5 years, in Spain by 123%, in Portugal by 74% and in Greece by 58%. On the other hand, Gdp has decreased in the past 5 years in all these countries! It is clear that austerity is counterproductive both for government debt reduction and economic growth! The European Commission is recognizing that the debt targets for Greece and Portugal will not be met although these countries have substantially cut public expenditure!

In my opinion there is no doubt that cutting public expenditure can not be alone the answer to the crisis! Central bankers, eurocrats, EU governments please wake up and make up your mind! Austerity is a huge mistake and it is time to change it!